Question 1

When a corporation experiences financial problems, bondholders are paid before stockholders.

Accepted Answer

A) True 
 B)False

Question 2

Suppose that you are a broker and people tell you the following about themselves. What sort of bond would you recommend to each? Defend your choices.
a. "I am in a high federal income tax bracket and I don't want to take very much risk."
b. "I want a high return and I am willing to take a lot of risk to get it."
c. "I want a decent return and I have enough deductions that I don't value tax breaks highly."

Accepted Answer

a. A municipal bond. Municipal bonds gen

Question 3

In a closed economy, what does T - G) represent?

Accepted Answer

A)  national saving 
B)  investment 
C)  private saving 
D)  public saving 
A)  national saving 
B)  investment 
C)  private saving 
D)  public saving

Question 4

According to the loanable funds model, which of the following events would result in higher interest rates and greater saving?

Accepted Answer

A)  Firms become pessimistic about the future and, as a result, they cut back on their plans to buy new equipment and build new factories. 
B)  The government goes from running a budget deficit to running a budget surplus. 
C)  Congress passes a reform of the tax laws that encourages greater saving. 
D)  Congress passes a reform of the tax laws that encourages greater investment. 
A)  Firms become pessimistic about the future and, as a result, they cut back on their plans to buy new equipment and build new factories. 
B)  The government goes from running a budget deficit to running a budget surplus. 
C)  Congress passes a reform of the tax laws that encourages greater saving. 
D)  Congress passes a reform of the tax laws that encourages greater investment.

Question 5

A government reduces its budget deficit, but at the same time people become concerned that the outlook for future government expenditures and revenues increase the chance it will default. Which of the following is correct?

Accepted Answer

A)  The reduced budget deficit will raise interest rates in general. The increased risk of default will raise interest rates on government bonds. 
B)  The reduced budget deficit will raise interest rates in general. The increased risk of default will reduce interest rates on government bonds. 
C)  The reduced budget deficit will reduce interest rates in general. The increased risk of default will raise interest rates on government bonds. 
D)  The reduced budget deficit will reduce interest rates in general. The increased risk of default will reduce interest rates on government bonds. 
A)  The reduced budget deficit will raise interest rates in general. The increased risk of default will raise interest rates on government bonds. 
B)  The reduced budget deficit will raise interest rates in general. The increased risk of default will reduce interest rates on government bonds. 
C)  The reduced budget deficit will reduce interest rates in general. The increased risk of default will raise interest rates on government bonds. 
D)  The reduced budget deficit will reduce interest rates in general. The increased risk of default will reduce interest rates on government bonds.

Question 6

Other things the same, when the interest rate rises,

Accepted Answer

A)  people would want to lend more, making the supply of loanable funds increase. 
B)  people would want to lend less, making the supply of loanable funds decrease. 
C)  people would want to lend more, making the quantity of loanable funds supplied increase. 
D)  people would want to lend less, making the quantity of loanable funds supplied decrease. 
A)  people would want to lend more, making the supply of loanable funds increase. 
B)  people would want to lend less, making the supply of loanable funds decrease. 
C)  people would want to lend more, making the quantity of loanable funds supplied increase. 
D)  people would want to lend less, making the quantity of loanable funds supplied decrease.

Question 7

A policy that induces people to save more shifts

Accepted Answer

A)  the supply of loanable funds rightward and increases investment. 
B)  the supply of loanable funds leftward and decreases investment. 
C)  the supply of loanable funds rightward and decreases investment. 
D)  the supply of loanable funds leftward and increases investment. 
A)  the supply of loanable funds rightward and increases investment. 
B)  the supply of loanable funds leftward and decreases investment. 
C)  the supply of loanable funds rightward and decreases investment. 
D)  the supply of loanable funds leftward and increases investment.

When a corporation experiences financial problems, bondholders are paid before stockholders.

In a closed economy, what does T - G) represent?

According to the loanable funds model, which of the following events would result in higher interest rates and greater saving?

A government reduces its budget deficit, but at the same time people become concerned that the outlook for future government expenditures and revenues increase the chance it will default. Which of the following is correct?

Other things the same, when the interest rate rises,

A policy that induces people to save more shifts

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Filters

Exam 18: Saving, Investment, and the Financial System

When a corporation experiences financial problems, bondholders are paid before stockholders.

In a closed economy, what does T - G) represent?

According to the loanable funds model, which of the following events would result in higher interest rates and greater saving?

A government reduces its budget deficit, but at the same time people become concerned that the outlook for future government expenditures and revenues increase the chance it will default. Which of the following is correct?

Other things the same, when the interest rate rises,

A policy that induces people to save more shifts

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

Filters